Forex Margin Trading As a Method of Leverage

A forex margin account can be used by a forex trader when he wishes to invest into a position which takes a higher financial investment than whatever is currently obtainable in the account of the trader. That is one of the unique advantages of the forex trading market wherein the traders have the ability to conduct transactions in currencies of worth that is much higher than the amount obtainable in the forex account. Unlike the currency markets and the equity market which offer little if any leverage to the trader, forex offers a leverage of 100:1 to its trader, implying that if a trader who has $1000 in his forex account decides to trade with a forex margin of 1% then he would be able to trade up to $100,000.

Forex margin trading is normally completed through the broker and in order to indulge in this type of trade one must entail the services of a brokerage who offers margin trading as part of a bigger package deal. This is owing to the fact that the idea of trading on forex margin is founded on acquiring a brief term loan from the broker for the purpose of indulging in trade and in exchange paying him a certain percentage of profits. Therefore, one first needs to open a merchant account with the broker, deposit some finances in it and then use forex margin trading to gain leverage and make a foray into the actual forex market.
Although forex margin trading is considered to be an advantage of forex currency trading, a word of caution here will be regarding the proverbial two sides of exactly the same coin. This implies a forex trader might well be familiar with the fact that if he is able to use the leverage option effectively, he stands to create phenomenal profits but as well if his investments turn out to be loss making then your extent of financial losses which would be incurred would also be manifold. This is evident from the fact that there are many individuals who complain of having lost out heavily due to forex trading and this is usually the case when people are misinformed concerning the market and make an educated use

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